FHA property standards for flooring

[NH loan officer]

The 2nd floor carpeting was removed from the home my customer is buying. Subfloor is 3/4-inch plywood. House is being sold as-is, so any repairs would be paid by the buyer. Of course, he wants to minimize his up-front expense. I've told him that FHA will probably require flooring to be installed (we're awaiting appraisal). He asks if painting subfloor would make it FHA acceptable. I've read another thread re: a concrete floor where there was considerable disagreement about FHA standards. Any thoughts on this situation?

 

[Lawrence R.]

Welcome!

This isn't a direct answer, but everything you need to know and more is in this "publication":


http://www.HUD.gov/offices/adm/hudclips/handbooks/hsgh/4150.2/index.cfm

Good luck!!

 

[conwayblue]

As stated in Revised Appendix D, FHA now permits an “as-is” appraisal for existing properties that serve as security for FHA-insured mortgages when minor property deficiencies, which generally result from deferred maintenance and normal wear and tear, do not affect the safety of the occupants or the security and soundness of the property. FHA no longer requires repairs for these types of minor cosmetic deficiencies to bring a property into compliance with FHA Minimum Property Requirements. Specifically, the guidance provided in Handbook 4150.2, CHG-1, Chapter 3, Paragraph 3-6, A-7 referencing all-weather road surfaces; Paragraph 3-6, A-8 referencing poor workmanship; Paragraph 3-6, A-11 referencing debris and trash in crawl space; Paragraph 3-6, A-16 referencing steps without a handrail; Paragraph 3-6, C referencing bare floors, badly soiled carpeting and cracked plaster and sheetrock is no longer applicable. Additionally, the guidance provided in Handbook 4905.1, REV-1, Chapter 2, Paragraph 2-7, A-2 referencing all weather road surfaces; Paragraph 2-8 referencing poor workmanship and Paragraph 2-14, C referencing crawl spaces with debris and trash is no longer applicable. Any reference to the Valuation Condition form (form HUD-92564-VC) and protocol for its completion contained in Handbook 4150.2 is no longer applicable as well.


From horse's mouth as answered in my thread on this very topic. I confirmed with the Denver HOC by phone today that bare slab / subfloor is okay "as is" unless there is a safety, security, or soundness issue (like subfloor damage).

 

[Parker]

Minimum property standards have not been elimiated.

Quote "APPENDIX D: VALUATION PROTOCOL" .....C. “Subject to the following Repairs or Alterations”.......3. Under Construction, more than 90% complete with only minor finish work remaining (buyer preference items i.e., floor coverings...."

This means that finished floors are expected.

 

[imjiminnh]

More quotes from the HUD manual

Hello NH Loan Officer from another NHite,

FHA no longer requires "subject to" conditioning for cosmetic items, as shown in the quote from the HUD manual below, worn floor coverings are okay and considered cosmetic, by extrapolation one might consider subfloor only to be acceptable, however further along in the HUD manual this is proved wrong (see second quote).

"Cosmetic repairs are not required; however, they are to be considered in the overall condition rating and valuation of the property. Examples of cosmetic repairs would include surface treatments, beautification or adornment not required for the preservation of the property. For example, generally, worn floor finishes or carpeting, holes in window screens, or a small crack in a windowpane are examples of deferred maintenance that do not rise to the level of a required repair but must be reported by the appraiser."

The appraisal must be conditioned "subject to"

"when the appraisal involves existing housing, or new construction more than 90% complete with only buyer preference items remaining (floor coverings, appliances, landscaping packages (soil must be stabilized to prevent erosion), requiring repairs or alterations to:
• Protect the health and safety of the occupants
• Protect the security of the property
• Correct physical deficiencies or conditions affecting structural integrity
• Complete buyer preference items for new homes, or to
• Complete repairs/improvements noted in work order or contractor estimates for the Streamline K
• Meet FHA Minimum Property Requirements"

There's no way around it, the appraisal must be conditioned subject to in order to comply with HUD guidelines. If it were a FNMA appraisal a cost to cure and an "as is" wouldn't be a problem.

On another note, I've noticed a few areas of the state with values stabilizing of late, most still declining to some degree, how's your business these days?

Jim

 

[Al Location]

Parker, I think that refers to new construction, if the builder just stops and does not finish the floor. On an existing unit, if one room is uncarpeted, it's merely considerd cosmetic.

 

[Greg Bell]

Yes , every appraiser is an Environmental Engineer , Structural Engineer , Home inspector , Geologist , Lead based paint analyzer , Foundation expert and Pest Inspector all with a clip board , pen , measuring tape and Camera.All this for a
lender demanded payment of $175 , wow , can't pass that up...

 

[NH loan officer]

DE underwriter just issued commitment on the purchase loan at the heart of my original question. Before issuing commitment, the underwriter called the Philly HOC. They talked about whether 2nd floor was needed (any bedrooms downstairs) and whether buyer could afford repairs. HUD and underwriter agreed: flooring must be installed prior to closing. Also affects marketability. Seems like there is some unfinished debate and disagreement about this issue ... hope I never run into a scenario like it again. But I appreciate all the feedback, and know that we tried our best for the client.

 

[John Hopkins]

Same question came up at recent NAIFA lunch where FHA Compliance Inspector was speaker. His answer was floor had to be finished. When asked if that meant carpet or other flooring he said no, paint meets standard. So, if they want to save money, Just paint the floor.

 

[WMOORES]

FHA put on an 8 hour valuation course in Tampa 06/2008. They had a slide show of what is acceptable. Bare slab ok, painted slab ok, wood flooring with paint stains ok, wood floor with piece of plywood nailed over hole (not even flush) ok, carpet pulled up and tack strips still in place ok. I found the last two could raise safety issues but they said it was all considered to be cosmetic. It basically came down to no exposed holes and/or termite damage.